Did you realize that Warren Buffett entered the jewelry industry back in the 1990s? He then chose to double down by investing in Ben Bridge Jeweller in 2000.
Today, it’s no surprise that colored diamonds consistently produce record breaking sales at Christies and Sotheby’s around the world – year after year. Buffett’s venture into retail diamonds wasn’t triggered by colored diamonds but we have to admit his sense for stability and profitability was right on target. The icing on the cake is colored diamonds which have so much more rarity and increased value.
A Hong Kong real estate tycoon bought almost $67 million worth of diamonds within two days in November 2015. First, he secured a vivid pink diamond (just over 16 carats) for about $28.5 million at Christies. Day two (Sotheby’s, Geneva) set an all-time record for a single piece – a very rare fancy vivid blue diamond (12.03 carats) dubbed the Blue Moon. Despite already having a collection of fine wines, art and other jewelry, Hong Kong billionaire Lau saw fit to expand his alternate investment portfolio in the most scintillating manner.
Today, high net worth individuals (HNWIs) are buying investment grade diamonds, both colorless and colored. Sure, passion is in play but the rising tide of big profits has trickled down to smaller carat deals in local markets both in white and colored diamonds.
Knight Frank Luxury Investment Index’s (KFLII) annual report (2015) revealed that tangible assets, such as gem stones, beat the average 7% growth rate when compared to ten other asset classes.
The Four Cs is ubiquitous. Although famous for simplifying diamonds for consumers, savvy investors realize colored diamonds are a different stone altogether. Remember, it was not long ago yellow tinted stones were unappealing at the retail level and virtually absent from the auction block.
The once coveted clarity grade, important to colorless stones, is not a major assessment factor concerning rare colored diamonds. Would you be surprised to learn that a five carat VVS2 yellow stone simply falls flat in value when compared to a three carat vivid blue diamond? Yes indeed, colored diamonds are not just another sparkly stone.
Aesthetics rule, and earn price premiums, when grading a colored diamond. Color saturation and dispersion is critical. High levels of dispersion increase value, especially when “colorless frames” (patchy appearance) are absent. Unlike colorless stones, shallow colored diamonds earn a premium too. Once again, aesthetically speaking, colored diamonds cut “free-style” lack detailed symmetry – which ironically, increases their value. Facet alignment trumps symmetry in that it can enhance the color intensity of coloreds.
Even shape can influence value more than expected. Once again, the factor of rarity enters the equation. Yellows in the fancy color category are oval shaped only about 8% of the time. At that, only 1-5 reach the market annually.
High Flying “Carat Club”
“High net worth individuals are looking for greater flexibility in their investments, and are seeking to make their wealth as mobile as possible so it can be readily accessed and moved.”
…so stated Barclay’s Wealth Insights (vol. 18, 2015) which revealed wealth secrets of high net worth individuals (HNWIs). Further, “…nearly half (43%)…lived in more than one country” declared the report after surveying wealthy individuals. Wealth Insights (Profit or Pleasure? Exploring the Motivations Behind Treasure Trends; vol. 15, 2012) backed up volume 18 by revealing “Owning possessions that are financially valuable, emotionally pleasing and culturally significant…shows no sign of abating.”
Personal experience guiding wealthy diamond investors on the path to profitability, has revealed that portability, concentration of wealth, and above average returns have encouraged “flight” from traditional investments. In fact, Wealth Insights stated that jewelry was a “coveted treasure” in all 17 high net worth locales worldwide. When queried about timing, 70% declared that the alternative investment of jewelry was an “own now” asset – only 30% chose precious metals.
Knight Frank Research put out The Wealth Report (2016) revealing that 56% of those Ultra High Net Worth Individuals (UHNWIs) in the Middle East and 58% in North America utilized luxury assets for further diversification. In addition, colored diamonds 5-year performance change (ending 2015) beat all other ten asset classes with the exception of the jewelry category according to the Knight Frank Luxury Investment Index (KFLII). Per The Wealth Report, top asset class sales levels placed the 12 carat Blue Moon in second place – one spot behind Picasso’s famous Women of Algiers painting. Coming in at a very distant third place was a Jaguar C-Type at $13.2 million. While respecting classic cars and great artwork, one has to wonder how high transportation and carrying costs are for those assets.
A Winning Hand
With over thirty-five years of experience as a GIA gemologist, a world travelled entrepreneur seeking out gem sources as well as being a tenured proprietor of jewelry businesses, I’m very passionate about all that is diamonds. Advising multiple investors and collectors has only solidified my love of procuring gems for pleasure and profit.
Investors have varied back grounds – from Wall Street to Main Street. My clients appreciate the fact that knowledge is power. Bringing a wealth of knowledge to the table is my contribution to the growth of investor portfolios.
Traveling the world continuously grants me unique insight into the diamond and gem industry. My studies at GIA under Bill Boyajian, the late Richard T. Liddicoat and going to South Africa with the late Dr. Vincent Manson, GIA’s curator of fine gems, prepared me well for onsite mine (Kimberley, Argyle, etc.) visits and deal making.
Carats: Concentrated Wealth
My associate Ari Goosen says “The best investments have been realized from colored diamond collections. You start with one diamond with a vision in mind. These important collections have stories and the stones are even named “Blue Moon” for example”. Ari is the owner of The Vault Consulting Group specializing in luxury fine jewelry and antiques in Vancouver, British Columbia. Ari is also the brother of Lee Siegelson, 3rd generation owner of Siegelsons, a world renowned specialty vintage New York jewelry boutique.
Another associate of mine, Mei Y Giam, Private Sales Director of Christie’s, London England says “Traditional financial assets are not performing as they used to and people are turning to tangible assets. With gemstones, in particular colored diamonds, we see an increasingly large base of new buyers with capital protection in mind. With a diamond, you feel it, you hold it and it is worth what it is worth. This is an important reason people are diversifying into important stones because they are portable, very secure stores of value. They represent an answer to an uncertainty in the world today which is truly international”
Famous Wall Streeter T. Rowe Price declared “It is better to be early than too late in recognizing the passing of one era, the waning of old investment favorites and the advent of a new era affording new opportunities for the investor.” This sentiment is exactly how I’ve advised my clients, albeit carefully respecting their individual goals.
Speaking of preserving wealth, Warren Buffett declared “Rule No.1 is never lose money. Rule No.2 is never forget rule number one.” Wealth Terra stands on similar ground by stating “Rule number one of playing any game is to know you’re in one! Rule number two…don’t forget rule number one.” Admittedly, diamond investing runs by its own play book. Being “diamond wise” is essential to avoiding pitfalls in order to prosper financially.
Despite record breaking sales at auction, as well as countless profitable private party transactions, myths abound decrying that diamonds are a poor investment. When counseled by a competent GIA gemologist with years of jewelry trade savvy, one would actually have to work hard at losing money with investment grade gems. At bare minimum, diamonds are a safe haven from instability and unpredictable market gyrations that traditional investments suffer from.
You will “…always get money out of them…” said Goosen about quality diamonds.
Going Once, Going Twice…
Christies wrapped up their 250th The Magnificent Jewels sale in Geneva which set a new diamond sales record.
At $2 million per carat, a pink pear shaped (9.14 carat) fancy vivid diamond drew in more than $18.1 million, achieving the second highest price on record for that shape. In fact, the November Magnificent Jewels auction showcased an Art Deco ruby and diamond bracelet which sold well above its pre-sale estimate – by four times.
Diamond auctions “…showed depth and stability of the market, combined with international interest…” stated Rahul Kadakia, Christies’ Jewelry Department International Head. Although colorless, the flawless Chloe diamond sold for $16.9 million in 2007.
The Graff Pink Diamond took the world by storm in 2010 when this stunning 24.78 carat pink beauty sold for $45.6 million at Christies. It was rated Fancy Intense Pink.
A “perfectly symmetric” blue heart shaped diamond sold for $12 million at Christies in 2011. The internally flawless stone was over 50 carats.
Legendary investor Peter Lynch stated “Investing without research is like playing stud poker and never looking at the cards.” It’s perfectly clear that any investment pursuit, especially in diamonds, must be guided by an expert with tenured “hands on” experience to ensure success.
Tangible assets provide new opportunities to enhance net worth. Diamonds as alternative investments, hands down, have proven to be an investor’s best friend.
Nadine Wellwood, President of WealthTerra Capital Management Inc. says “Investors are looking for new ways to secure their savings, reduce risk and still achieve a reasonable return,” which is what led her down the path to exploring colored diamonds as an asset class.
Many years ago, after an enjoyable and profitable investment trip to Tel Aviv, I realized that the nickname “Billionaire Blues” was anything but sad. Although pink and yellow investment grade coloreds build wealth for their ecstatic owners, blue diamonds remain as a “top lot” at record breaking auctions. And let’s not forget reds and purples are over the top!
Hundreds of years of history prove that diamonds are a superior concentration of wealth. Astute investors respect diamond due diligence. HNWIs paved the way for investors with modest budgets to pursue “smart money” deals – in diamonds.
Remember S.P.A.R.K.L.E.™ stands for Safe, Portable, Appreciates, Rare, King of gems, Legitimate and most importantly, Exquisitely Beautiful! Taking potential HNWI’s to the source is what I live to do. www.PerfectlyClearAdventures.com provides a summary of how these travelling with client’s opportunities will be fulfilled. By providing best value, integrity and joyous experiences, investors can have fun while making sound decisions and have the peace of mind to enjoy the best of both worlds.